Sinai Cement downgraded, Egypt

23 June 2011

Sinai Cement was downgraded to "hold" from "strong buy" by CI Capital as the repercussions from the unrest on the company became clear.

Its plant was attacked by activists, forcing it to shut down for 11 working days. The bombing of a pipeline in El Arish in April also forced the company to switch to costly mazut fuel oil as a temporary replacement for natural gas. The producer’s shares declined 1.3 per cent yesterday to 46 Egyptian pounds, after first-quarter profits declined 25 per cent to EGP116.8m compared with the same period last year.

Demand for the country’s cement fell 11.7 per cent in the first quarter compared with the same period a year earlier.

Cement prices appear to be on a modest decline, as they decreased from EGP492/t to EGP491, but those numbers do not tell the whole story.

"We learnt from local producers that some of them tend to compensate traders through cash incentives," said Basma Shebeta, an analyst at CI Capital in Cairo. "These producers are actually selling their production at cheaper prices in order to stimulate their local sales."
Published under Cement News